Intrinsic value of Newater Technology, Inc. - NEWA

Previous Close

$5.28

  Intrinsic Value

$54.31

stock screener

  Rating & Target

str. buy

+929%

Previous close

$5.28

 
Intrinsic value

$54.31

 
Up/down potential

+929%

 
Rating

str. buy

We calculate the intrinsic value of NEWA stock by summing up the current values of future distributable cash flows generated by the company and dividing the sum by the number of outstanding shares. As such, the intrinsic value calculation depends entirely on projections. The more accurate your projections of the company's performance are - the more reliable is the intrinsic value calculation result. Please make sure to check the stock valuation input data below and adjust it if necessary. The quality of the output (intrinsic valuation result) is only as good as the quality of the input. See also DISCLAIMERS.

STOCK VALUATION INPUT DATA

Revenue (in 0001), $M
Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Variable cost ratio, %
Fixed operating expenses, $M
Interest rate on debt, %
Effective corporate tax rate, %
Production assets / Revenue, %
Life of production assets, yrs
Working capital / Revenue, %
Revenue / Adjusted assets
Adjusted equity ratio
Cash flow adjustment, % of Revenue
Book value of equity, $M
Shares outstanding, mln
Market capitalization, $bln 0.1

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
   2
   3
   4
   5
   6
   7
   8
   9
   10
   11
   12
   13
   14
   15
   16
   17
   18
   19
   20
   21
   22
   23
   24
   25
   26
   27
   28
   29
   30
   31

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  60.00
  54.50
  49.55
  45.10
  41.09
  37.48
  34.23
  31.31
  28.68
  26.31
  24.18
  22.26
  20.53
  18.98
  17.58
  16.32
  15.19
  14.17
  13.26
  12.43
  11.69
  11.02
  10.42
  9.87
  9.39
  8.95
  8.55
  8.20
  7.88
  7.59
Revenue, $m
  40
  62
  92
  134
  189
  260
  349
  458
  590
  745
  925
  1,131
  1,363
  1,622
  1,907
  2,219
  2,556
  2,918
  3,305
  3,716
  4,150
  4,607
  5,087
  5,589
  6,114
  6,661
  7,231
  7,824
  8,440
  9,081
Variable operating expenses, $m
  30
  47
  70
  101
  142
  196
  263
  345
  444
  560
  696
  851
  1,025
  1,220
  1,434
  1,669
  1,922
  2,194
  2,485
  2,794
  3,121
  3,465
  3,825
  4,203
  4,598
  5,009
  5,438
  5,884
  6,347
  6,829
Fixed operating expenses, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total operating expenses, $m
  30
  47
  70
  101
  142
  196
  263
  345
  444
  560
  696
  851
  1,025
  1,220
  1,434
  1,669
  1,922
  2,194
  2,485
  2,794
  3,121
  3,465
  3,825
  4,203
  4,598
  5,009
  5,438
  5,884
  6,347
  6,829
Operating income, $m
  10
  15
  23
  33
  47
  64
  86
  113
  146
  185
  229
  281
  338
  402
  473
  550
  634
  724
  820
  921
  1,029
  1,143
  1,262
  1,386
  1,516
  1,652
  1,793
  1,940
  2,093
  2,252
EBITDA, $m
  10
  16
  24
  34
  49
  67
  90
  118
  152
  192
  238
  291
  351
  417
  491
  571
  657
  751
  850
  956
  1,068
  1,185
  1,309
  1,438
  1,573
  1,713
  1,860
  2,013
  2,171
  2,336
Interest expense (income), $m
  0
  0
  1
  2
  4
  6
  9
  13
  18
  23
  30
  38
  48
  59
  71
  85
  100
  116
  134
  153
  173
  195
  218
  242
  267
  293
  321
  350
  380
  411
  443
Earnings before tax, $m
  9
  14
  20
  29
  40
  55
  74
  96
  123
  154
  191
  233
  279
  331
  388
  451
  518
  590
  667
  748
  834
  925
  1,020
  1,119
  1,223
  1,331
  1,444
  1,561
  1,682
  1,809
Tax expense, $m
  2
  4
  5
  8
  11
  15
  20
  26
  33
  42
  52
  63
  75
  89
  105
  122
  140
  159
  180
  202
  225
  250
  275
  302
  330
  359
  390
  421
  454
  488
Net income, $m
  7
  10
  15
  21
  30
  40
  54
  70
  90
  113
  139
  170
  204
  242
  284
  329
  378
  431
  487
  546
  609
  675
  745
  817
  893
  972
  1,054
  1,139
  1,228
  1,320

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total assets, $m
  73
  112
  168
  243
  343
  472
  634
  832
  1,071
  1,352
  1,679
  2,053
  2,474
  2,944
  3,462
  4,027
  4,639
  5,296
  5,998
  6,744
  7,532
  8,362
  9,232
  10,144
  11,096
  12,089
  13,123
  14,199
  15,318
  16,481
Adjusted assets (=assets-cash), $m
  73
  112
  168
  243
  343
  472
  634
  832
  1,071
  1,352
  1,679
  2,053
  2,474
  2,944
  3,462
  4,027
  4,639
  5,296
  5,998
  6,744
  7,532
  8,362
  9,232
  10,144
  11,096
  12,089
  13,123
  14,199
  15,318
  16,481
Revenue / Adjusted assets
  0.548
  0.554
  0.548
  0.551
  0.551
  0.551
  0.550
  0.550
  0.551
  0.551
  0.551
  0.551
  0.551
  0.551
  0.551
  0.551
  0.551
  0.551
  0.551
  0.551
  0.551
  0.551
  0.551
  0.551
  0.551
  0.551
  0.551
  0.551
  0.551
  0.551
Average production assets, $m
  11
  17
  26
  37
  52
  72
  97
  127
  163
  206
  256
  313
  378
  449
  528
  615
  708
  808
  915
  1,029
  1,150
  1,276
  1,409
  1,548
  1,694
  1,845
  2,003
  2,167
  2,338
  2,515
Working capital, $m
  10
  16
  24
  35
  49
  67
  90
  118
  152
  192
  239
  292
  352
  419
  492
  572
  659
  753
  853
  959
  1,071
  1,189
  1,312
  1,442
  1,577
  1,719
  1,866
  2,019
  2,178
  2,343
Total debt, $m
  24
  45
  75
  115
  169
  238
  325
  431
  560
  711
  886
  1,087
  1,313
  1,566
  1,844
  2,147
  2,476
  2,829
  3,206
  3,606
  4,029
  4,475
  4,943
  5,432
  5,943
  6,477
  7,032
  7,610
  8,210
  8,835
Total liabilities, $m
  39
  60
  90
  131
  184
  253
  340
  447
  575
  726
  902
  1,102
  1,329
  1,581
  1,859
  2,162
  2,491
  2,844
  3,221
  3,621
  4,045
  4,490
  4,958
  5,447
  5,959
  6,492
  7,047
  7,625
  8,226
  8,850
Total equity, $m
  34
  52
  78
  113
  159
  219
  293
  385
  496
  626
  777
  951
  1,146
  1,363
  1,603
  1,864
  2,148
  2,452
  2,777
  3,122
  3,487
  3,871
  4,275
  4,697
  5,138
  5,597
  6,076
  6,574
  7,092
  7,631
Total liabilities and equity, $m
  73
  112
  168
  244
  343
  472
  633
  832
  1,071
  1,352
  1,679
  2,053
  2,475
  2,944
  3,462
  4,026
  4,639
  5,296
  5,998
  6,743
  7,532
  8,361
  9,233
  10,144
  11,097
  12,089
  13,123
  14,199
  15,318
  16,481
Debt-to-equity ratio
  0.700
  0.860
  0.960
  1.020
  1.060
  1.090
  1.110
  1.120
  1.130
  1.140
  1.140
  1.140
  1.150
  1.150
  1.150
  1.150
  1.150
  1.150
  1.150
  1.150
  1.160
  1.160
  1.160
  1.160
  1.160
  1.160
  1.160
  1.160
  1.160
  1.160
Adjusted equity ratio
  0.463
  0.463
  0.463
  0.463
  0.463
  0.463
  0.463
  0.463
  0.463
  0.463
  0.463
  0.463
  0.463
  0.463
  0.463
  0.463
  0.463
  0.463
  0.463
  0.463
  0.463
  0.463
  0.463
  0.463
  0.463
  0.463
  0.463
  0.463
  0.463
  0.463

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  7
  10
  15
  21
  30
  40
  54
  70
  90
  113
  139
  170
  204
  242
  284
  329
  378
  431
  487
  546
  609
  675
  745
  817
  893
  972
  1,054
  1,139
  1,228
  1,320
Depreciation, amort., depletion, $m
  1
  1
  1
  1
  2
  3
  3
  4
  6
  7
  9
  10
  13
  15
  18
  20
  24
  27
  31
  34
  38
  43
  47
  52
  56
  62
  67
  72
  78
  84
Funds from operations, $m
  7
  11
  16
  23
  32
  43
  57
  74
  95
  120
  148
  180
  217
  257
  301
  350
  402
  458
  517
  581
  647
  718
  792
  869
  949
  1,033
  1,121
  1,211
  1,306
  1,404
Change in working capital, $m
  4
  6
  8
  11
  14
  18
  23
  28
  34
  40
  46
  53
  60
  67
  74
  80
  87
  93
  100
  106
  112
  118
  124
  130
  135
  141
  147
  153
  159
  165
Cash from operations, $m
  3
  5
  8
  12
  17
  25
  34
  46
  61
  80
  102
  127
  157
  190
  228
  269
  315
  364
  418
  475
  535
  600
  668
  739
  814
  892
  974
  1,059
  1,147
  1,239
Maintenance CAPEX, $m
  0
  0
  -1
  -1
  -1
  -2
  -2
  -3
  -4
  -5
  -7
  -9
  -10
  -13
  -15
  -18
  -20
  -24
  -27
  -31
  -34
  -38
  -43
  -47
  -52
  -56
  -62
  -67
  -72
  -78
New CAPEX, $m
  -4
  -6
  -8
  -12
  -15
  -20
  -25
  -30
  -36
  -43
  -50
  -57
  -64
  -72
  -79
  -86
  -93
  -100
  -107
  -114
  -120
  -127
  -133
  -139
  -145
  -152
  -158
  -164
  -171
  -177
Cash from investing activities, $m
  -4
  -6
  -9
  -13
  -16
  -22
  -27
  -33
  -40
  -48
  -57
  -66
  -74
  -85
  -94
  -104
  -113
  -124
  -134
  -145
  -154
  -165
  -176
  -186
  -197
  -208
  -220
  -231
  -243
  -255
Free cash flow, $m
  -1
  -1
  -1
  -1
  1
  3
  7
  13
  21
  31
  45
  62
  82
  106
  134
  165
  201
  240
  283
  330
  381
  435
  492
  553
  617
  684
  754
  828
  904
  984
Issuance/(repayment) of debt, $m
  15
  21
  30
  41
  54
  69
  87
  107
  128
  151
  176
  201
  226
  252
  278
  303
  329
  353
  377
  400
  423
  446
  468
  490
  511
  533
  555
  578
  601
  624
Issuance/(repurchase) of shares, $m
  6
  8
  11
  14
  17
  19
  21
  22
  21
  18
  12
  3
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash from financing (excl. dividends), $m  
  21
  29
  41
  55
  71
  88
  108
  129
  149
  169
  188
  204
  226
  252
  278
  303
  329
  353
  377
  400
  423
  446
  468
  490
  511
  533
  555
  578
  601
  624
Total cash flow (excl. dividends), $m
  20
  28
  40
  54
  71
  92
  115
  141
  170
  200
  232
  265
  308
  358
  412
  469
  529
  593
  660
  731
  804
  880
  960
  1,043
  1,128
  1,217
  1,310
  1,405
  1,505
  1,608
Retained Cash Flow (-), $m
  -13
  -18
  -26
  -35
  -46
  -60
  -75
  -92
  -110
  -130
  -151
  -173
  -195
  -217
  -240
  -262
  -283
  -304
  -325
  -345
  -365
  -384
  -403
  -422
  -441
  -460
  -479
  -498
  -518
  -538
Prev. year cash balance distribution, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash flow adjustment, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash available for distribution, $m
  7
  10
  14
  19
  25
  32
  40
  49
  59
  70
  81
  92
  113
  141
  172
  207
  246
  289
  335
  386
  439
  496
  557
  620
  687
  757
  831
  907
  987
  1,070
Discount rate, %
  4.30
  4.52
  4.74
  4.98
  5.23
  5.49
  5.76
  6.05
  6.35
  6.67
  7.00
  7.35
  7.72
  8.11
  8.51
  8.94
  9.39
  9.86
  10.35
  10.87
  11.41
  11.98
  12.58
  13.21
  13.87
  14.56
  15.29
  16.05
  16.86
  17.70
PV of cash for distribution, $m
  7
  9
  12
  16
  19
  23
  27
  31
  34
  37
  38
  39
  43
  47
  50
  53
  54
  53
  52
  49
  45
  41
  36
  32
  27
  22
  18
  14
  11
  8
Current shareholders' claim on cash, %
  90.7
  83.2
  77.2
  72.5
  68.7
  65.8
  63.5
  61.8
  60.6
  59.8
  59.4
  59.3
  59.3
  59.3
  59.3
  59.3
  59.3
  59.3
  59.3
  59.3
  59.3
  59.3
  59.3
  59.3
  59.3
  59.3
  59.3
  59.3
  59.3
  59.3

Newater Technology, Inc. is a wastewater purification treatment company. The Company is focused on the development, manufacture and sale of disk tube reverse osmosis (DTRO) and disk tube nanofiltration (DTNF) membrane filtration products that are used in the treatment, recycling and discharge of wastewater. The DTRO membrane and DTNF membrane is used to treat and recycle wastewater. The Company also supplies hardware and engineered systems necessary to implement integrated solutions with DTRO and DTNF products. The Company provides engineering support and installation, technical advice and service, and other project-related solutions to filter wastewater into clean water. The company provides services to chemical and energy industries. The Company also offers traditional wastewater treatment solutions, such as activated carbon and resins.

FINANCIAL RATIOS  of  Newater Technology, Inc. (NEWA)

Valuation Ratios
P/E Ratio 28
Price to Sales 4.7
Price to Book 5.1
Price to Tangible Book
Price to Cash Flow -56
Price to Free Cash Flow -18.7
Growth Rates
Sales Growth Rate 71.4%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 100%
Cap. Spend. - 3 Yr. Gr. Rate NaN%
Financial Strength
Quick Ratio 0
Current Ratio 0.3
LT Debt to Equity 0%
Total Debt to Equity 27.3%
Interest Coverage 0
Management Effectiveness
Return On Assets 13.8%
Ret/ On Assets - 3 Yr. Avg. 9.7%
Return On Total Capital 19%
Ret/ On T. Cap. - 3 Yr. Avg. 14.7%
Return On Equity 26.7%
Return On Equity - 3 Yr. Avg. 22.2%
Asset Turnover 0.8
Profitability Ratios
Gross Margin 41.7%
Gross Margin - 3 Yr. Avg. 28.2%
EBITDA Margin 25%
EBITDA Margin - 3 Yr. Avg. 13.1%
Operating Margin 8.3%
Oper. Margin - 3 Yr. Avg. 12.3%
Pre-Tax Margin 25%
Pre-Tax Margin - 3 Yr. Avg. 13.1%
Net Profit Margin 16.7%
Net Profit Margin - 3 Yr. Avg. 10.3%
Effective Tax Rate 33.3%
Eff/ Tax Rate - 3 Yr. Avg. 11.1%
Payout Ratio 0%

NEWA stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the NEWA stock intrinsic value calculation we used $25 million for the last fiscal year's total revenue generated by Newater Technology, Inc.. The default revenue input number comes from 0001 income statement of Newater Technology, Inc.. You may change it if you feel that it should be adjusted for some unusual circumstances that are not expected to be repeated in the future or if you already know (from interim financial statements, for example) that this year's revenue is going to be quite different.

Revenue growth rate. Forecasted future revenue growth rate is the most important input parameter for the intrinsic value calculation. Unlike other input parameters that are reasonably expected to be in line with their historic averages or their historic trends, the revenue growth rate by and large is a wild card: nobody really knows what the company's revenue will be in the future. Of course, the level of unpredictability is different for different industries (utility companies being the most predictable and, thus, less risky).
    We use three input parameters to forecast the revenue growth rate in our NEWA stock valuation model: a) initial revenue growth rate of 60% whose default value is the revenue growth rate in the most recent quarter compared to the quarterly revenue a year ago; b) terminal revenue growth rate of 5% whose default value is chosen to be close to the average nominal (i.e. not adjusted for inflation) GDP growth rate; and c) revenue decline factor of 0.9, which stipulates that revenue growth rate in each forecasted year will be equal to the difference of the revenue growth rate in the preceding year and the terminal revenue growth rate multiplied by this revenue decline factor (with the passage of time the revenue growth rate will be approaching the terminal revenue growth rate, but not quite reaching it - though the difference could be infinitesimally small).
    At the revenue decline factor of 1, the future revenue growth rate is forecasted to be constant and equal to the initial revenue growth rate. The smaller the revenue decline factor, the faster the revenue growth rate will approach the terminal revenue growth.

Discount rate. The discount rate is used for determining the present value of future cash flows: future cash flows are "discounted" as at normal conditions (that translate into positive expected return on investment) one dollar today is worth more than the same dollar in the future. Unlike all other valuation models, we use variable discount rate, i.e. it increases for each consecutive year. This is done to account for higher risk of cash flows coming in further in the future.
    The initial discount rate of 4.3%, whose default value for NEWA is calculated based on our internal credit rating of Newater Technology, Inc., is applied to the cash flow expected to be received a year from now (well, actually, to be precise, in the financial year following the base year - the last year for which we have financial statements). For each consecutive year the discount rate is multiplied by the discount rate multiplier of 1.05, e.i. each year it increases by 5%. Feel free to change this number to correspond to your level of risk assessment of Newater Technology, Inc..
    By the way, it is easy to set the discount rate to be constant (this would make comparison with other valuation models easier): just set the discount rate multiplier equal to 1 and chose the magnitude of the initial discount rate to your liking.

Variable cost ratio is the ratio of variable costs (i.e. costs that fluctuate with fluctuation of the volume of production) to the revenue expressed as a percentage. In the calculation of intrinsic value of NEWA stock the variable cost ratio is equal to 76%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $0 million in the base year in the intrinsic value calculation for NEWA stock. These expenses increase with the level of inflation in subsequent years.

Interest rate on debt is the average all-in rate of interest paid by the company on its debt. It is set at 5.4% for Newater Technology, Inc..

Corporate tax rate of 27% is the nominal tax rate for Newater Technology, Inc.. In reality, companies find ways to pay much less taxes than that or not to pay them at all.

Cash flow adjustment could be used for any adjustment the investor deems necessary. Most commonly we use this field to account for stock options-related effects in excess of what is reported on the company's income statement. The cash flow adjustment is expressed as a percentage of the revenue, and in the current valuation of the NEWA stock is equal to 0%.

Production assets are the company's assets used for manufacturing products or provision of services. In the valuation model input table they are expressed as a percentage of revenue and for NEWA are equal to 27.7%.

Life of production assets of 34.3 years is the average useful life of capital assets used in Newater Technology, Inc. operations. It is used to calculate yearly capital expenditures needed to keep these assets in good order - we call it the maintenance CAPEX.

Working capital is the difference between the company's current assets and liabilities. In the model we use the ratio of working capital to revenue, which for NEWA is equal to 25.8%. A negative number means that the company is apt at using financial resources of its suppliers and customers; a large positive number, on the other hand, means that it either provides in-kind financing to others or is not good at managing its inventories.

Book value of equity - $20.991288 million for Newater Technology, Inc. - is used in calculation of the "floor" for intrinsic valuation based on the discounted cash flow (DCF) method. Even if the prospects are very bad for a company, its assets could always be sold now for their current fair market value.

Shares outstanding of 10.809 million for Newater Technology, Inc. is needed to calculate the intrinsic value of one share.

Market capitalization is used here only for reference purposes and as a quick check that the share price and the number of shares outstanding numbers are correct - something especially to be cognizant about at stock splits. So, the market capitalization of Newater Technology, Inc. at the current share price and the inputted number of shares is $0.1 billion.

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